Paris-headquartered quantitative investment firm Tobam and China Asset Management Company (ChinaAMC) have entered into a strategic partnership to develop anti-benchmark China A-shares equity investment strategies.
China A-shares are set to integrate the MSCI Emerging Markets benchmarks by 1 June 2018.
The anti-benchmark China strategies will seek to maximise diversification across the CSI indexes (CSI 300, CSI 500 & CSI 800 universes) by applying Tobam’s maximum diversification approach aiming to avoid the risk biases, that more traditional allocation methods such as market-cap weighting can lead to.
The strategy targets primarily large, sophisticated institutional investors. Additionally Tobam said the anti-benchmark CSI 300, CSI 500 and CSI 800 equity strategies could attract non-domestic investors who believe in the Chinese growth story but would like to access it in a diversified way while mitigating the potential concentration risk in the CSI indices.
The maximum diversification approach of Tobam in the China A-Shares universe aims to deliver the risk premium of the asset class via diversification, seeking to translate into both excess return and reduced volatility against the corresponding market cap-weighted index.
“Chinese clients have shown interest in various smart beta strategies with pre-defined screening and weighting rules that overlay simple exposure to equity classes, and we expect these strategies to gain traction. Hence, we are keen to develop smart beta strategies for the Chinese market based on appropriate risk measurements. The collaboration between ChinaAMC and Tobam incorporates our research efforts to provide investors with a unique investment strategy.” said Xiaodong Tang, CEO of ChinaAMC.
Yves Choueifaty, CEO of Tobam, commented: “We are proud to partner with ChinaAMC to apply for the first time our maximum diversification approach to Chinese A-shares equities. ChinaAMC’s strong knowledge of the local market paired with Tobam’s research capabilities is a unique combination that we believe offers unprecedented investment opportunities in Chinese equities to investors worldwide.”
As of end December 2017, ChinaAMC had $153bn (€123.1bn) of assets under management while Tobam currently manages $9.5bn (€7.64bn).